By TODD BISHOP, SEATTLE POST-INTELLIGENCER REPORTER

Published 10:00 pm, Wednesday, January 25, 2006

Microsoft Corp. has decreased its short-term estimates for sales of the Xbox 360 after experiencing trouble keeping up with the initial demand for the game console.

The company now expects to sell 2.5 million Xbox 360s worldwide within the first 90 days of the pre-holiday launch, rather than the 2.75 million to 3 million that had previously been expected for that period, Microsoft Chief Financial Officer Chris Liddell said in an interview after the company released its quarterly financial results this afternoon.

However, Liddell said Microsoft believes it is still on track to sell 4.5 million to 5.5 million Xbox 360s by the end of the company’s fiscal year in June. The company said in a Securities and Exchange Commission filing that it sold 1.5 million Xbox 360s worldwide between the Nov. 22 North American launch and the end of the company’s financial quarter on Dec. 31.

“We’re happy with the overall result,” Liddell said.

Liddell said some variation from the Xbox 360 projection in the short term was to be expected given “the overall volatility and complexity of a launch like this.”

Microsoft, trying to get a head start on Sony’s dominant PlayStation franchise in the next console generation, took the unprecedented step of launching in North America, Europe and Japan over the course of three weeks.

Microsoft had said previously that it expected initial demand for the console to exceed supply. However, Liddell said the company also ran into some component shortages that complicated the situation. The company’s inability to satisfy the demand for the console has left some consumers frustrated. Microsoft has said it expects to bring a third Xbox 360 manufacturer on line next month.

The company’s Home and Entertainment Division, which includes the Xbox 360, reported a revenue increase of $183 million, or 13 percent, compared with the same quarter last year, due primarily to the launch of the new console, the company said.

Companywide, Microsoft reported revenue of $11.84 billion for the quarter ended Dec. 31, an increase of 9 percent over the same quarter the previous year, with net income of $3.65 billion, an increase of 5 percent.

Two of Microsoft’s seven divisions, Microsoft Business Solutions and Mobile & Embedded Devices, reached operating profitability for the first time in the quarter.